Digital Shop Barbarian Group Denies Sale to Cheil Worldwide

Creative Powerhouse Reportedly Sold for $10M to South Korean Network Looking to Boost U.S. Presence

NEW YORK (AdAge.com) -- Barbarian Group, the digital firm that heralded the rise of smaller, creatively focused and technology-fluent shops, is rebuffing rumors that it has been purchased by Cheil Worldwide at a rock-bottom price of $10 million.

Barbarian blew onto the ad scene five years ago when it created the then-groundbreaking 'Subservient Chicken' website for Burger King, on behalf of Crispin Porter & Bogusky.
According to a blog post by Stuart Smith, former editor of Marketing Week magazine in the U.K., Cheil has already purchased the company for $10 million, but Barbarian Chief Operating Officer Rick Webb flatly denied the report of the sale and its exceedingly low figure.

Mr. Webb sent an agency-wide memo in response to the rumors today, stating the agency hasn't made any deals. According to a person familiar with the situation, Cheil and Barbarian Group have been in discussions for several months.

Mr. Webb wouldn't comment as to whether the company was nearing a deal with Cheil, saying that "we routinely talk to various companies about exploring different ways of working, from the holding companies to other types of companies." Multiple messages to Cheil representatives in South Korea were not returned (though with the time-zone difference it was very early Saturday morning). And a Cheil North America executive said, "We're not in a position to confirm or deny anything." A call to Cheil USA's president was not returned.

Subservient Chicken
Barbarian blew onto the ad scene five years ago when it created the then-groundbreaking "Subservient Chicken" website for Burger King, on behalf of Crispin Porter & Bogusky. Since then, it has had a mix of largely project-based work for General Electric, CNN, Comcast and Virgin America and others either directly serving the advertiser or as a production partner to agencies.

But without the comfort of retainers enjoyed by an agency relationship, project work can be tough to sustain in an economic downturn. Like many small, independent shops, it has been cash poor throughout the past year; Barbarian had layoffs this summer, cutting 15% of staff, according to people familiar with the situation, and has been long been holding acquisition discussions with major holding companies.

Still, a selling price of $10 million seems extraordinarily low for a shop that has long been a standard-bearer for digital creativity and that continues producing innovative work, such as its recent collaboration with visual effects shop Psyop to add augmented reality features to this month's Esquire magazine. Mr. Webb said that 2009 billings were "well in excess" of $10 million, demonstrating the absurdity of the low price tag. "Business has been hard this year, but it's good."

Should a deal get done, it would help bolster the U.S. and digital presence of Cheil, which is South Korea's largest agency and is 15% owned by Samsung. While it grew out of the Samsung network and retains the electronics giant's global business with the help of agreements with other agencies, it is looking to consolidate its role with Samsung and start building its own international business apart from its largest client.

Establishing digital
Investing in digital companies is a key part of its future strategy; in September, it acquired a top digital agency in China called Open Tide Greater China. "The future of Cheil Worldwide lies in the growth of global business and in the establishment of digital marketing capability," wrote Cheil CEO Nack-Hoi Kim in a letter to employees this month.

To date, Cheil has 34 agencies in 28 countries, with U.S. offices in New Jersey and Texas. In December 2008 Cheil bought a 49% stake in Beattie McGuinnes Bungay, a London-based agency, and Cheil has said it plans to eventually purchase the remaining stake. The Barbarian deal comes just as Beattie McGuinnes attempts to formally establish its U.S. operations under former Cliff Freeman & Partners CEO Clayton Ruebensaal and Neil Powell, former creative at Fallon and Margeottes Fertitta Powell.

That Barbarian, which has a offices in Boston, New York and San Francisco, would capture the attention of Cheil is no surprise, as the shop has worked with Samsung on a previous project, 2006's AnyFilms.net, which highlighted video features on the electronics maker's mobile handsets.